IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF OHIO

EASTERN DIVISION

Zachary Lester, et al., :

 

Plaintiffs, : Case No. 2:11-cv-00850

 

v. :

 

Wow Car Company, Ltd., : JUDGE EDMUND A. SARGUS, JR.

et al., Magistrate Judge Kemp

:

Defendants.

 

OPINION AND ORDER

This matter is before the Court to consider a motion to

compel discovery filed on February 21, 2014 by Plaintiffs Zachary

and Brandi Lester. The motion is now fully briefed. For the

following reasons, the Court grants the motion.

I. Introduction

The Court has described this case in numerous prior orders. 

Briefly, it involves a dispute over the purchase of a used car by

plaintiffs Zachary and Brandi Lester. The Lesters returned the

car to the seller twice within the first week they owned it, and

the engine blew six days after the purchase. The Lesters then

sued the seller in the Court of Common Pleas for Knox County,

Ohio, and the case was removed here. Several amended pleadings,

adding new parties and new claims, have since been filed. The

most recent amended complaint names as defendants Amy Hartzler

dba Wow Car Company, Wow Car Company, Ltd., Max R. Erwin, Marmax

Enterprises LLC, Mid-Ohio Motor Funding Group, Ltd. and The

Hartzler-Erwin Group and asserts claims for breach of an express

warranty, breach of the implied warranty of merchantability,

breach of the implied warranty of fitness for a particular

purpose, deceptive trade practices, violations of the Truth in

Lending Act (“TILA”), violations of the Ohio Consumer Sales

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Practices Act (“OCSPA”), and alter ego. 

The most recent motion to compel deals with bills of sale

generated by Wow Car Company for calendar year 2010 and the first

six months of 2012. The Lesters have received all of the

relevant bills of sale for 2011, but claim that they need

additional information in order properly to support their claim

under the Truth in Lending Act that Wow charged credit customers

more for warranties than it charged cash customers. Wow’s

refusal to produce the bills of sale, and its opposition to the

motion to compel, rests primarily upon the argument that, to

date, the Lesters have not come forth with any evidence to

support their TILA claim. Wow also argues that, like the 2011

bills of sale, bills of sale for prior and subsequent years will

not produce any relevant evidence to support that claim. The

question before the Court, as in any case where the proper scope

of discovery is at issue, is whether the discovery requests which

the moving party seeks to enforce are “reasonably calculated to

lead to the discovery of admissible evidence” - that is, evidence

which would be “relevant to any party’s claim or defense...” 

Fed.R.Civ.P. 26(b)(1).

II. The Parties’ Arguments

As the Lesters note, their TILA claim is premised upon what

they believe to be pricing disparities between warranties sold to

customers who paid cash for their vehicles, and those sold to

customers who bought vehicles on credit. Their analysis of the

2011 bills of sale shows that slightly over 2% of Wow’s cash

customers purchased a warranty of any type, while approximately

12% of buyers on credit did so. The cash customers (and there

were only two of them) paid either $119 or $199 for their

warranties; the credit customers’ median price for a warranty was

$1,349.00. While this is, according to the Lesters, some

evidence that Wow charged its credit customers more, it is

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probably too small a sampling to show definitively that there was

a “consistent” disparity between the amounts charged to different

types of buyers. 

Citing to Cornist v. B.J.T. Auto Sales, Inc., 272 F.3d 322,

327 (6th Cir. 2001), the Lesters point out that in order to show

a TILA violation based on differential pricing, the plaintiff

must provide more than “the comparison of two spot transactions”

- he or she must show a “‘causal connection’ between the higher

price and the extension of credit.” Id. One way to do so is to

demonstrate a “consistent difference in the base price for cash

and credit customers”; if that is done, “legitimate reasons for

the individual price differences approach the vanishing point.” 

Id. at 328. The Court of Appeals emphasized that there were

other ways to prove the same point, and that even an occasional

increase in price due to the credit status of a customer was not

permissible under TILA. Id. Nevertheless, the Lesters’ avenue

of proof in this case appears to involve the “consistent

difference in ... price” approach, and they contend that the

bills of sale are either admissible evidence as to the price

differential, or reasonably calculated to lead to the discovery

of such evidence. And, because the 2011 bills of sale show so

few cash sales, they worry that without the additional 18 months

of records, they may not be able to prove that there was a

consistent difference in the cash and credit prices for

warranties, or that Wow will attack their proof as inadequate if

they rely exclusively on what the 2011 bills of sale show.

Wow’s response to this argument is interesting. It does, as

the Lesters fear, consist, in part, of an argument that the

current evidence - the 2011 bills of sale - “does not come

remotely close to establishing” a TILA violation. Memorandum in

Opposition, Doc. 110, at 2. That is so, says Wow, because in

order for it to have violated TILA, it must have charged

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different prices for the same warranty contract, depending upon

whether the customer paid cash or bought on credit, and that the

bills of sale do not show which warranty any particular customer

purchased. In other words, the bills of sale, by themselves, may

show that customers paid different prices for warranties, but

they do not explain why. One possible explanation, of course,

would be the one offered by the Lesters, but another is the fact

that Wow offered its customers a range of warranty providers who,

in turn, offered a range of warranties, so each bill of sale

might reflect the purchase of a different warranty product. 

Based on what has been produced so far, Wow claims that the

Lesters have “no evidence to support” their “outrageous” TILA

claim. Id. at 3. 

Responding to the Lesters’ argument that Cornist provides

legal support for a differential pricing theory, Wow asserts

that, in actuality, Cornist turned on the fact that the plaintiff

was unable to show that buying a warranty was a precondition for

obtaining an extension of credit. Wow then argues that because,

in this case, the 2011 bills of sale show that the great majority

of credit customers did not purchase a warranty, “it is simply

impossible for Plaintiffs to prevail in this case, as there are

no facts to remotely suggest that [Wow] was charging service

agreement fees to customers as a condition of extending credit.” 

Id. at 5. Based on this reading of Cornist and upon the argument

that the bills of sale do not show details about the warranties

purchased, Wow concludes that the production of additional bills

of sale would not solve these problems nor move the Lesters any

closer to proving a viable TILA claim. 

III. Discussion

The Court begins its analysis with a brief discussion of the

difference in the parties’ reading of the Cornist case. The

plaintiff in that case made three separate claims under TILA:

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that the seller “charged increased base prices for cars to credit

customers without disclosing such increased prices as finance

charges, failed to disclose the distribution of document fees and

service agreement fees to third parties, and assessed those fees

only on credit customers without disclosing them as finance

charges.” Cornist, 272 F.3d at 324. In the district court, the

plaintiff presented evidence about cash and credit transactions

which showed a “mark-up” (or the difference between what the

seller had paid for the car and what it was sold for) which was

consistently higher (and actually much higher) for credit

transactions than for those based on cash. The district court

held that although the evidence showed differences in the two

types of transactions, those differences were “sporadic” rather

than “systematic” and that a TILA violation required proof of

systematically different pricing. It also dismissed the other

two claims, which had to do with failure to disclose that certain

fees were allocated in part to third parties and with an alleged

assessment of an undisclosed finance charge, in the form of a

document fee, to credit customers.

The only claim raised in Cornist which is relevant to this

case is the differential pricing claim. As to that claim, the

Court of Appeals said that “[a]n increase in the base price of an

automobile that is not charged to a cash customer, but is charged

to a credit customer, solely because he is a credit customer,

triggers TILA's disclosure requirement.” Id. at 327. After

discussing, as set forth above, what type of proof was needed to

show a “consistent” pattern of differential pricing, the Court of

Appeals held that the chart presented by the plaintiff was

sufficient to advance the case beyond the summary judgment stage;

even though it analyzed only nineteen cash sales, and even though

that small number might be statistically insignificant, such

potential insignificance could not be determined on the basis of

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the record. The Court of Appeals also pointed out that the

seller might well be able to offer some explanation for why each

credit sale mark-up was so large, but that “most such

explanations would create genuine issues of material fact

incapable of resolution on summary judgment.” Id. at 329.

Wow’s argument that, under Cornist, it would be “impossible”

for the Lesters to prevail on their TILA claim, focuses on the

second claim made in Cornist - that a service agreement fee was

charged only to credit customers. The Court of Appeals noted

that there was no evidence to support this claim and, in fact,

the evidence pointed the other way; many credit customers of that

seller were not charged the fee. If the Lesters were arguing

that only Wow’s credit customers were charged a warranty or

service agreement fee, Wow would be correct that the evidence

does not appear to support such a claim, but that is simply not

the TILA claim asserted in this case. Consequently, Cornist’s

discussion and resolution of that claim is not pertinent here.

Since Wow’s view that Cornist completely precludes the

Lesters from prevailing on their differential pricing claim is

incorrect, that leaves only Wow’s argument that such a claim

cannot be made out using only the information from the bills of

sale. That may or may not be true, but it is largely irrelevant

to the question of whether the Lesters are entitled to these

documents as part of discovery. The Court is aware of no

authority for the proposition that if a document does not fully

prove or refute a party’s claims or defenses, it need not be

produced in discovery. In fact, just the opposite is true. Even

if a particular document would not, itself, be admissible - for

example, because some Rule of Evidence would preclude its

admission at trial - the document is still discoverable if there

is “a plausible chain of inferences showing how discovery of the

item sought would lead to other admissible evidence.” Vardon

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Golf Co., Inc. v. BBMG Golf Ltd., 156 F.R.D. 641, 651 (N.D. Ill.

1994).

Wow’s argument in opposition to the motion to compel

actually demonstrates how that principle applies here. The bills

of sale, Wow contends, may show differential pricing, but do not

show why; the “why” involves an analysis of each warranty

purchased, because each one might be different. But the bills of

sale are the starting point for this analysis, because they do

show that, on average (albeit, as of now, for only a handful of

cash sales) that credit customers spent more for warranties than

cash customers. As the Lesters note in their reply, Wow’s

position seems to be that there needs to be even more factual

development on this point. But, as of now, the Lesters are

content with the additional bills of sale. Additionally,

especially in light of the comments made in Cornist about the

need for statistically significant sampling, and the fact that

the number of cash customers who bought warranties in 2011 is so

small, the Lesters have satisfactorily shown that the additional

bills of sale may assist them in proving a “consistent” pattern

of differential pricing, making them a proper subject of

discovery.

The Court adds these observations, which are not, of course,

binding decisions of any sort. The Lesters have suggested that

the need for additional discovery as to the nature of the

warranties purchased by each Wow customer might be obviated by

placing the burden on Wow to come forward with evidence to rebut

a presumption created by the pricing difference shown on the

bills of sale. That is a substantive legal ruling which cannot

be made in the context of a motion to compel discovery. There

may also be a problem with pursuing additional discovery into the

individual warranties because the discovery cutoff has passed. 

However, if the Lesters have made a previous discovery request

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that covers additional documents, or if they are documents which

should have been identified by the defendants as part of their

initial disclosures, or as a supplementation to those

disclosures, that problem may not be insurmountable. All of

those questions are for either another day or another judicial

officer, however, and the Court does not address them further

here.

IV. Conclusion

Based on the foregoing, Plaintiffs’ motion to compel (Doc.

109) is granted. The bills of sale in question shall be produced

within fourteen days of the date of this order. 

V. Procedure for Seeking Reconsideration

Any party may, within fourteen days after this order is

filed, file and serve on the opposing party a motion for

reconsideration by a District Judge. 28 U.S.C. §636(b)(1)(A),

Rule 72(a), Fed. R. Civ. P.; Eastern Division Order No. 91-3, pt.

I., F., 5. The motion must specifically designate the order or

part in question and the basis for any objection. Responses to

objections are due fourteen days after objections are filed and

replies by the objecting party are due seven days thereafter. 

The District Judge, upon consideration of the motion, shall set

aside any part of this Order found to be clearly erroneous or

contrary to law.

This order is in full force and effect, notwithstanding the

filing of any objections, unless stayed by the Magistrate Judge

or District Judge. S.D. Ohio L.R. 72.3.

/s/ Terence P. Kemp 

United States Magistrate Judge

 

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